It's a discipline. It's a virtue. It's a card game. It's a curse.
It's at the heart of good investing.
It's what I wish I had more of. It's what I wish you had more of. It's what I can't believe more people don't have more of! It's the one thing I stress to more people at more public appearances these days than anything else.
(And yes please, do capitalize that P, maestro.)
"Patience is a virtue few men hold." I don't remember the source of that epigram at the moment, but that's the first line that pops into my head when I think Patience.
Aristotle's Nicomachean Ethics conveys a helpful way to think about virtues like Patience. I grew up thinking or being taught in binary, that virtue is the opposite of vice. So there's courage and its opposite cowardice, power and its opposite weakness, and compassion and its opposite cruelty. Thus, when I first began reading the Ethics after college I was quite surprised to learn that Aristotle disagreed with my worldview.
Aristotle presents virtue as a golden mean between two opposite and equally bad extremes. So on one extreme side you have too little patience, or no patience at all -- bad for all the reasons we can imagine. But, at the other extreme, there is too much patience! And that can create results just as bad as impatience. In the middle lies the golden mean, true Patience, which perfectly balances the two and is appropriately and effectively used in any situation. I have adopted Aristotle's view.
Investors have to try to hit this golden mean as well as anyone else. And given that the universal scales, in my experience, tilt heavily toward the "too little patience" side, we know what we must guard against, especially during a bear market.
"What am I going to do with my retirement now? Why haven't my stocks come back yet? Should I just sell them now, the darned things?"
That's the bear market version. The bull market version usually goes something more like this: "I can't wait to check my stocks today. Have I checked my stocks this hour yet? Have I? You know, it's been a few minutes; I really should check my stocks again, just to see how I'm doing." [Refresh browser. Refresh browser. Refresh browser.]
We want our investments to rise to their full height today, now, so that we might import a suddenly rosier future directly into the present. Now now now! And in so doing we fail to appreciate what we have right here right now.
The media don't help. The nature of rapid-fire reporting and ubiquitous CNN-tuned TVs in airports constantly insist that we be eager to find out what has changed. What's changed? Now? And what's changed now? And what does that then mean?
May I coin a word? It's "overnews." I believe we live in a world that is "overnewsed," causing many of us regularly to think in shorter time frames than are best for our own good. When we overfocus on the here and now we risk making poor decisions that fail to account for factors or likelihoods that are NOT part of the here and now. We are myopic. We zig with the zigs, and zag with the zags.
This can mean many unfortunate things in many different contexts in our lives. But you've tuned in to a money site, and specifically, a column normally given over to considering making investments in companies whose volatility and riskiness will try your patience. Anyway, here are three simple pieces of advice for the impatient:
1. Don't sweat entry prices and exit prices -- instead, dollar-cost average. If you're an investor who feels too much apprehension about buying in and too much potential regret about selling out, don't do it all-or-nothing. Do it piecemeal. Divide your money into thirds, let us say, and purchase the stock you're looking at on the 17th of each month for the next three months. Sell out of it the same way. Take the emotion and the short-term guessing out of the equation, and don't chase sixteenths. (How quaint -- already a reference to the market when it used to trade in fractions. How old-fashioned of me.) Please note of course that if you take this approach, you'll be paying more in commissions. Though if you're using a good discount broker, the paltry extra 30 bucks will probably be worth the peace of mind.
2. Ask yourself if company conditions have really changed. Rather than just sell a stock because it's gone up or down (and down more than up, these days), approach the decision from another angle. Ask yourself if the reasons for your having bought the stock in the first place have significantly changed. This is part of being a business-focused investor, not a zig-with-the-zigger.
3. Try not to look at your stocks for a month. Go on. It's summer. August is just beginning. Go for it. Don't look at your stocks. Can you do it? What does that say about you if you can? What does that say about you if you can't?
Yessirree, Patience gets short shrift in our society. As parents, we tend to insist on patience from our children when they're asking us in the car, "When will we get there?" or some other such nuisance. But do we truly model patience for our children (show, don't tell)? Do we point to examples in popular culture of where someone showed a heroic patience? Do we venerate old patient saints?
So what's the bottom line of this column? Are you impatient to find out? OK. Today's column was just a reminder: Patience.
-- David Gardner, August 3, 2001
David Gardner is co-founder of The Motley Fool, where investors write for investors.